Paper passports and driving licences should be torn up and replaced by a digital document that can be stored on a smartphone, a thinktank has said.

Handing people a more secure, digital proof of identity would reduce online crime and save money, according to the Social Market Foundation. It points out that other countries have already developed secure ID technology and Britain has “not fully kept up with technological and social change”.

It warns that the continued reliance on paper documents and the lack of secure online ID has contributed to a boom in identity fraud, which increased by 68% between 2010 and 2016. If current trends continue, there will have been 1.5 million fraud cases in the UK between 2010 and 2020.

The thinktank suggests that a government programme called Verify, which has created a secure online identity check, should be built upon to eventually allow people to dispense with paper passports and driving licences altogether.

“Around the world, forward-looking countries are embracing the opportunities offered by digital identity authentication and verification,” the report said. “Estonia’s e-ID enables digital signatures, internet voting and public service access, and the UAE now has a smartphone passport app.

“We envision a future in which individuals could choose to no longer hold a passport, driving licence and birth certificate as individual verifiers. Instead, they could opt for all these forms of documentation to sit under one register of entitlement. This could bring about significant cost savings for government, not least from reduced postage and printing costs associated with different types of physical identification.” It said that the Driver and Vehicle Licensing Agency spent about £40m on printing and postage in 2016-17 – close to 17% of total operating costs. The design for the new UK passport is also out for tender as part of a £490m government contract.

The thinktank also suggests that not having some form of paper ID has become an indicator of financial and social exclusion. “Those in relatively deprived areas are much less likely to have access to a passport or driving licence,” it said.

“Physical documentation will probably be required for some time, given varying degrees of digital uptake across the globe, though the long-term picture undoubtedly looks paperless.”